Signs the global economic recovery is
faltering and Europe’s fiscal crisis is spreading added to
investor concern that banks will have difficulty in clawing back
the $2.4 trillion they’re owed by that region’s most indebted
nations.

The cost of insuring against a default on financial-company
bonds surged, with the Markit iTraxx Financial Index of credit-
default swaps linked to the senior debt of 25 European banks and
insurers climbing 6 basis points to 189, according to CMA
DataVision in London, near the highest level since March 2009.
The Markit iTraxx SovX Western Europe Index of contracts on 15
governments fell 1.5 basis points to 167, compared with the
record-high 174.4 reached on June 4.

Europe’s debt-ridden nations have to raise almost 2
trillion euros ($2.4 trillion) within the next three years to
refinance maturing bonds and fund deficits, according to Bank of
America Corp. data. A U.S. jobs report at the end of last week
fell short of economists’ forecasts, while a spokesman for
Hungary’s prime minister said it was “no exaggeration” to
suggest the eastern European nation may default.

“The market is so volatile right now, it’s ready to blow
up on any headline no matter how meaningful it should be,” said
Aziz Sunderji, a credit strategist at Barclays Capital in
London. “People are extremely risk-averse.”

Italy needs 1.07 trillion euros by 2013 to refinance debt
coming due, Spain must raise 546 billion euros and Greece needs
152.6 billion euros, according to a Bank of America estimate in
May. Portugal and Ireland each have to raise about 80 billion
euros, the data show.

Risk Indexes Rise

Elsewhere in credit markets, JPMorgan Chase & Co. is
marketing $716.3 million of bonds backed by commercial
mortgages. Triumph Group Inc. plans to sell $350 million of
eight-year notes as soon as tomorrow. Freddie Mac, the mortgage-
finance company with U.S. government support, plans to sell
about $1 billion of securities backed by loans on multifamily
properties.

Broader credit-default swaps indexes in the U.S. and Europe
rose. The Markit CDX North America Investment Grade Index
climbed 2.46 basis points to a mid-price of 128 basis points as
of 12:31 p.m. in New York, the highest since March 23, according
to Markit Group Ltd. In London, the Markit iTraxx Europe Index
of contracts linked to the debt of 125 companies increased 9.6
basis points to a mid-price of 135.38, Markit data show. Both
indexes typically rise as investor confidence deteriorates and
fall as it improves.

Credit-default swaps pay the buyer face value if a borrower
fails to meet its obligations, less the value of the defaulted
debt. A basis point equals $1,000 annually on a contract
protecting $10 million of debt.

Commercial Mortgage Debt

The JPMorgan transaction, which is the second of newly
issued commercial-mortgage backed bonds to be sold this year,
consists of 36 loans on 96 properties, said the person,
according to a person familiar with the sale who declined to be
identified because terms aren’t public.

Sales of commercial-mortgage backed securities halted in
2008 as credit markets froze, choking off funding to property
borrowers. Even with government aid, only $3.04 billion of the
debt was issued last year, compared with $11.2 billion in 2008
and a record $232.4 billion in 2007, according to data compiled
by Bloomberg. Royal Bank of Scotland Group PLC sold $309.7
million of the bonds in April. During the boom, sales grew as
large as $7.6 billion, the data show.

Debt from Triumph, the Wayne, Pennsylvania-based maker of
aircraft components, may yield 8.5 percent to 8.75 percent,
according to a person familiar with the offering. Moody’s
Investors Service assigns Triumph a Ba2 corporate family rating.
Standard & Poor’s rated the proposed offering B+.

Freddie Mac

The Freddie Mac debt, which will be the third of six such
transactions that the McLean, Virginia-based company expects
this year, is likely to be sold around June 11, according to an
e-mailed statement.

Investors will be protected against default on the
underlying mortgages by a Freddie Mac guarantee and by credit
protection created by the deal’s structure, the company said.
Bank of America and Deutsche Bank AG will lead the underwriting,
according to the statement.

In emerging markets, the extra yield investors demand to
own corporate debt instead of government securities widened 2
basis points to 334 basis points, or 3.34 percent, according to
JPMorgan’s EMBI+ Index. Spreads have tightened from this year’s
high of 346 basis points on May 20.

Argentine bonds declined for a second straight day. The
yield on Argentina’s 8.28 percent dollar bond due in 2033 rose 5
basis points to 13.01 percent. The price fell 0.25 cents to
64.93 cents on the dollar.